A controversial report released this week by the pro-labor Economic Policy Institute in Washington asserts that 1.6-million U.S. workers have lost their jobs because of increased trade between the United States and China.
The central finding of the report is that burgeoning U.S.-China trade has directly or indirectly reduced U.S. employment.
Some jobs were lost when factories transferred their production overseas. Others were lost when low-cost Chinese imports forced U.S. firms to close.
Economist Robert Scott, the author of the report, which examines U.S. China trade from 1989 to 2003, says the United States had assumed that job-creating exports to China would soar after Beijing implemented the free-trade measures required by World Trade Organization membership. But he says that assumption has proven false.
"Everybody assumed that the United States would lose jobs in labor intensive industries like textiles and apparel. But the opening of China that was supposed to take place after China joined the W.T.O. in 2001 should have increased our sales dramatically of high-tech products where we are supposed to have a trade advantage," he said.
That has not happened, says Mr. Scott. In fact, to the contrary, he says the United States now has a trade deficit with China in high-tech products. "At this point China alone is responsible for the entire 32-billion dollar U.S. trade deficit in high technology goods," he said.
But Daniel Griswold, a trade analyst at Washington's Republican leaning Cato Institute, says Mr. Scott's research is badly flawed. "The fundamental flaw in this kind of analysis is that they just look at jobs eliminated from import competition, but do not make any account of the jobs created from foreign investment (in the US), by access to cheaper imports. They ignore all the other factors of a big, dynamic global economy." he said.
Mr. Griswold says Mr. Scott's analysis overlooks the job eliminating impact of the 2001 economic recession and ignores the 20-million new jobs that were created in the United States during the past decade. Far from being bad for U.S. workers, Mr. Griswold says the huge volume of U.S./China trade has been good for American workers.
"One, it lowers prices at the store. Americans love to buy the kind of products made in China, shoes, clothing, toys, consumer electronics. Secondly, we benefit as producers being able to sell into the market in China, one of the few rapidly growing export markets. And then we benefit as borrowers because China is helping to finance our government deficit, by buying treasury bonds and thus keeping interest rates down."
While there is no consensus on Mr. Scott's central point about job loss due to trade with China, there is more support for his principal policy recommendation. That has to do with the exchange rate. "I think the U.S. government should take a very aggressive stance with China and should coordinate with other countries-especially Europe and Japan-to compel China to heavily re-value its currency by as much as 30- to 40-percent," he said.
China's fixed exchange rate with the U.S. dollar, which has been unchanged for nearly a decade, is thought to be unrealistically low, giving China a large price advantage in bi-lateral trade. China last year registered a huge 148-billion dollar trade surplus with the United States. But even though America buys far more from China than it sells, U.S. exports to China have risen by 75-percent since China joined the W.T.O.
Analysts agree that China-U.S. economic relations are likely to remain strained as long as the trade imbalance and the overall volume of bi-lateral trade are rising. The U.S. China economic relationship today, say the experts, closely resembles the strained ties between the U.S. and Japan of the early 1990s.